CPSIA – Fox Business on CPSC Crushing Small Businesses

I appeared on Fox Business tonight. Please check it out.

I received a wise email today entirely filled with quotes. Here’s one to ponder:

“A remark generally hurts in proportion to its truth.”
- Will Rogers

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CPSIA – Fox Business on CPSC Crushing Small Businesses

CPSIA – Mania Update

Hey, did you ever wonder what it might take to satisfy a mass market retailer on safety in the post-CPSIA world? Here are the requirements of Costco – all 141 pages of fun. It’s a huge file – you may have wait a little while for it to fully download.

These documents took us six man-hours to read – to assess whether or not we understood the rules and whether we knew what to do to comply. The breathtaking out-of-pocket testing costs are scattered throughout the document – see pages 40, 41, 51, 58 and 131-134.

Needless to say, compliance with these rules is an exceptionally expensive undertaking. This kind of duplicative testing (you have to use their testing vendor and cannot supply other independent tests you have already performed and paid for) has never revealed anything that I would call a “safety” issue, but has revealed numerous meaningless niggling issues that cost a ton to resolve. No one is made safer by all this expense but we are sure made poorer. All that matters these days is whether we comply with all 141 pages, every line and every word.

Sometimes, I think the debate over the CPSIA mania is too abstract. It’s too theoretical and sides chosen by whether you “care” about safety or not. Few people bother themselves with the details. Even fewer people are willing to be accountable for what the law has unleashed.

Requirements like this 141-page document were rare before Congress took over safety administration. Now that the mania has been stoked, it is going to be hard to put the genie back in the bottle. People feel secure in a blizzard of new safety requirements. “Obviously” more requirements means more safety . . . .

Ahem, no. First of all, the more requirements, the more likely that focus shifts from safety to compliance. SAFETY AND COMPLIANCE ARE NOT THE SAME THING. Guys, here’s more bad news – tests are not always right and rarely provide meaningful information. Our supply chain is where we build in safety and by running our business properly, tests are rarely useful (we get a LOT of repetitive passing test reports). The blind faith placed in stacks of new rules and “independent” testing as a means to create “safety” is unrealistic. I remember talking to a Whirlpool engineer who assured me that EVERY recent recall of Whirlpool products had been tested under federal and state standards and passed with flying colors. Hmmm. The CPSIA safety system is devolving into a faith-based system.

Even worse and much more profound is the commerce that this kind of mania extinguishes. How many companies can manage these requirements? How many companies will pass on making a deal to avoid the risk and hassle of these purposeless requirements?

Regulators like to stick their heads in the sand. These after-market requirements are “not their responsibility”. Let the market decide, blah blah blah. Unfortunately, they can’t get off the hook so easily – they started the mania and feed it regularly with their big fines and ridiculous recalls. Sorry, we don’t live in a vacuum – yes, the actions of the regulators have an impact on the market.

To get a sense of it, read the 141 pages of Costco requirements. Welcome to my world!

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CPSIA – Mania Update

CPSIA – TIA’s Toy Safety Certification Program Quietly Dies

TIA Members, please sit down before reading on.

Over the past three years, the Toy Industry Association famously invested millions of dollars in members’ dues in something called the “Toy Safety Certification Program” (TSCP). When I say “millions”, I mean it. On October 14, 2009, TIA outside counsel Rick Locker referred to “$2 million of technology” available to the industry via the TSCP website. He was referring to the cost of the program to date, roughly. The program began in August 2007 – that’s about $1 million per year.

The TSCP recently died a natural death, mercifully. See Carter Keithley’s September 7th release on this topic. I figure the program cost NO LESS THAN $3 million of TIA members’ money, perhaps more, with NO return on investment. A TOTAL loss. Ouch. Don’t expect any heads to roll.

The TSCP was a terrible idea from the get-go. For one thing, the TSCP was a business and the TIA should have NEVER tried to go into business in competition with its members, if only for the reason that real businesses beat dilettantes every time. I believe the business plan for the TSCP was fantastic, if it existed at all in any formal sense. No rational business person would have EVER made such a reckless investment but then again, it wasn’t their money. . . so the bet apparently seemed “reasonable” to the decision-makers.

The basic concept underlying this massive bet with other people’s money was that if the TSCP cracked down on its own members harshly enough, the CPSC might back off and let the industry police itself. The horrific historical analogs must not have occurred to anyone, nor their tragic ends.

The idea of the TSCP was flawed in several critical respects. First of all, the issues that spawned the CPSC had little to do with the standards – the problem was compliance. A program like the TSCP would hardly snare those who were indifferent to compliance – it was VOLUNTARY. Second, the theory required that the TIA be so harsh that the CPSC would let the TIA take over. Of course, this made the TSCP a rather unappetizing vehicle for most of us. And it was VOLUNTARY. We never considered participating.

Worst of all, the TSCP grossly favored the mass market companies in the toy industry. This could not have been a shock to anyone as the authors of the program were largely mass market toy people. I documented this in my October 18, 2009 blogpost entitled “The TIA Just Wants to HELP You!“. The program was going to kill all but a few of us, but that didn’t stop the TIA.

What ultimately stopped the TIA was a lack of business. Apparently, we weren’t alone in disregarding the multi-million dollar investment of our industry organization. Rumor has it that certain large companies committed to using the program but then backed away when it became clear that no one was joining them in this fun. No one likes a competitive disadvantage, apparently. Who’da thunk it?

And the legacy of the TSCP? The TSCP did such a great job of outlining a horrific testing scheme that the CPSC used critical elements of it as a starting place for their “15 Month Rule”. You can trace the harshness of the TSCP through to the pending rule on testing frequency and “reasonable” testing programs. Yes, the TIA provided this leadership – after all, if it’s good enough for the TIA, how could the industry complain?

How, indeed. Pass the barf bag, please.

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CPSIA – TIA’s Toy Safety Certification Program Quietly Dies

CPSIA – CPSC Small Business Ombudsman

I spoke to Neal Cohen today, the CPSC’s new Small Business Ombudsman. Neal reached out to me for my perspective, which was nice of him. He has reached out to others as well, perhaps he has spoken to you.

I found Neal to be an intelligent and sympathetic character, very patient (which was required when speaking to me about the CPSIA) and interested in other viewpoints. That said, by all appearances Neal does not have the power to wave a magic wand and make our troubles go away. I know some of you anticipated that the ombudsman office was to be the agency’s psychotherapist for small businesses (“There, there, everything will be okay . . . if you strike oil under your building”). You may be right.

In any event, having an ombudsman gives us a way to give feedback to the agency, and perhaps Neal can work some miracles. I am not especially optimistic, but that’s no reflection of my first impressions of Neal.

I recommend that you reach out to Neal Cohen in his official capacity and tell him what your concerns are, and ask for his help. Let’s hope he finds a magic wand before the CPSC kills us all.

Here is his contact information:

Neal S. Cohen
Acting Small Business Ombudsman
U.S. Consumer Product Safety Commission
4330 East West Highway, Suite 815
Bethesda, MD 20814
Tel: 301.504.7504
ncohen@cpsc.gov

Small Business Ombudsman Resources:
www.cpsc.gov/sbo
sbo@cpsc.gov
Toll Free: 888.531.9070
D.C. Area: 301.504.7945
Fax: 301.504.0121

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CPSIA – CPSC Small Business Ombudsman

CPSIA – Hey Sucker!

801 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 9 days left until Election Day.

Consider this note I received today from a friend:

“Thought you’d like to know that i received a check in the mail today from Uncle Sam’s new Affordable Care Act to help cover the cost of my Medicare drugs in the amount of $250. Mind you, this one-time gift arrived just eleven days prior to election and, to me, an obvious bribe to receive my endorsement of their plan. Hope this backfires on them as I am immediately turning this check back to Joel Pollak in the form of my contribution in the same amount. Hope it helps the last few days of his successful campaign.” [Emphasis added.]

The Affordable Care Act is Dem-sponsored legislation designed to ameliorate the “donut hole” that Seniors experience in drug coverage under Medicare. I am sure this is a real problem. That said, the arrival of this check magically two weeks before the election is just one more bit of evidence of the privilege taken by Congress and the White House to award themselves gifts in even-numbered years to ensure reelection. The real question is “how dumb are we?”

Please note that the CPSIA was just such a gift. Passed almost unanimously on August 14, 2008 right ahead of the 2008 election season, the CPSIA allowed every member of Congress to blunt accusations that they were “soft” on Chinese toys. Not unlike so many other pieces of complex legislation passed by Nancy Pelosi’s Congress, our esteemed members of Congress apparently never read the bill which covered soup-to-nuts in Children’s Products, not just toys. Even today, you can find Congressmen expressing surprise and alarm that the law covered anything other than toys.

Duping members of Congress must seem like child’s play to devious staffers. After all, they know the members can’t or won’t read their handiwork. We call that the “political process”.

Some people ask me why I cut the Republicans such a “break” by attacking only Democrats on this law. Didn’t all the Republicans vote for the law, too? By and large, that’s true. However, since passage of the CPSIA, many Republicans have stood up and tried to help us. They have allied with my efforts and have gone to considerable effort, not to mention taken political risk, to address a Congressional screw-up that imperils Small Business without any corresponding safety benefit for consumers. Has every Republican member of Congress helped us? No. However, ZERO Democrats have lifted a finger to help us and most have scorned us publicly and privately. The Democrats who were put in charge of the CPSC are perhaps the MOST insensitive and the most strident in their political posturing.

Until the Democrats DEMONSTRATE that they can be trusted, which for me will take quite a bit of work on their part, I have NO interest in giving them a pass. The Republicans have EARNED my support. I hope you are not susceptible to bribes or other trickery by the party in control. Your business and your markets hang in the balance. Assess the situation clearly and pick sides. It’s now or never!

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CPSIA – Hey Sucker!

CPSIA – Jan Schakowsky Wants to Design Your New Home, Too.

801 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 9 days left until Election Day.

801 days without ANY help. Amazing . . . .

Rep. Jan Schakowsky, the Illinois Congresswoman who informed the WSJ that I am a “cynical special interest” because I dared to participate in the upcoming midterm elections, is not content with rearranging your business and the Children’s Product industry. Now she wants to redesign your new home.

Does she have good taste, you ask. Well, read on and see what you think of Jan Schakowsky as your architect or decorator.

Your home is your last refuge, right? Not if she gets her way – but then again, she knows what’s best for you! After all, a bigger government involved in every aspect of your life is a BETTER government. The estimable Ms. Schakowsky is the sponsor of HR 1408 Inclusive Home Design Act of 2009. In other words, this law-in-the-makings is her handiwork.

She brags about this pending legislation on her Facebook page in posts dated October 6, so she must be pretty psyched about it. I gather she wants the electorate to know of her excellent leadership in Congress, so I thought I’d help out. Happy to lend a hand to such a “great” leader.

Best I can tell, Ms. Schakowsky latest brain wave is to require you to redesign your new home to be disability-friendly if you get “federal assistance”. The so-called purpose of the act is “[t]o require all newly constructed, federally assisted, single-family houses and town houses to meet minimum standards of visitability for persons with disabilities.”

And what might she have in mind, precisely? Anyone who receives “federal assistance” needs to design new homes to meet several ADA-like standards even if they are useless to the buyers. No matter that this will cost money or that you don’t want it. It’s good for you, Jan says so. It may also make it difficult for you to find new homes without these features. Like cod liver oil, you’ll get used to it!

As noted, to get into this spot, you need to receive federal assistance. Here’s a sample of what might constitute “federal assistance”:

“any assistance that is provided or otherwise made available by the Secretary of Housing and Urban Development or the Secretary of Veterans Affairs, or any program or activity or such agencies, through any grant, loan, contract, or any other arrangement, after the expiration of the one-year period beginning on the date of the enactment of this Act, including . . . grants, subsidies, or any other funds . . . services of Federal personnel . . . any tax credit, mortgage or loan guarantee or insurance. . . .”

In other words, if you even brush against the federal government in constructing your new home, you are COVERED by this law. Tax credit for your new energy-efficient furnace? You’re IN. HUD loan refinance for a development of several homes? You’re IN. Fannie Mae or Freddie Mac involved? You’re IN. Vet benefits? You’re IN. Inspected by a federal employee for some reason? You get the idea.

Hey, here’s the REAL idea – the government belongs in EVERY aspect of your life. Ms. Schakowsky doesn’t even think you should be allowed to measure the door frames in your house without her oversight. It doesn’t even matter if you have a disabled person living in the house – you MIGHT be visited by one and certainly, you would not able to accommodate that visit without Ms. Schakowsky’s supervision.

Perhaps you should invite her, too, just to work out the kinks. Uh-oh, I sense an amendment coming!

Had enough yet? If not, vote DEM on November 2nd so society can be reengineered a little bit more. On the other hand, if you have the vaguest sense that this is a runaway train and might need to be stopped before it’s too late . . . vote the other way.

The Dems brought this on themselves. They put people like Schakowsky in leadership roles. The Children’s Product industry is in tatters as a result. PLEASE STOP THE INSANITY ON NOVEMBER 2ND!!!

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CPSIA – Jan Schakowsky Wants to Design Your New Home, Too.

CPSIA – Appropriate Recall Points Out The Real Problem

795 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 15 days left until Election Day.

The CPSC today announced a recall of a product called “Bathtub Subs”. The battery-operated bathtub submarine toy is “yellow, has a smiling face, turquoise windows, an orange propeller and an orange periscope that turns the toy on and off. The intake valve has a water pump that sucks in water to propel the submarine.” The cringe-worthy problem: “The intake valve on the bottom of the submarine toy can suck up loose skin, posing laceration hazard to children. . . . CPSC and the company are aware of 19 incidents of lacerations to boys’ genital area. One of the incidents required medical attention.”

This product has a real safety issue, and it has nothing to do with lead. We can understand the problem because the issues can be described accurately and the injuries can be measured. This is how we can measure the right response. The product was aimed at very young children (toddlers) in bath-time play. It seems foreseeable that the toy might rest against “sensitive” areas. The product was not apparently designed with this risk in mind. Please contrast your ability to assess the issue here with, say, rocks, fossils, pens, ATVs, bicycles, musical instruments, children’s underwear, shoes, books and other products that have famously run afoul of the CPSIA’s restrictions on lead without demonstrating any apparent safety issues.

As a toy maker, I hate when this kind of problem happens. It makes all of us look bad, even we had nothing to do with the issue. We all get blamed for problems caused by other companies. This is how CPSIA’s are born.

There were 19 incidents in the last year with this product. Makes you wonder what it takes to get someone to do something about the issue. Do you think this was a “mystery”? Here’s what you find on the Amazon.com review page today (before it gets taken down):

“Dangerous toy, May 25, 2010
By Tyler Warren

I bought this toy for my 12 month old son. He was playing with it in the bath one evening and put it down in his lap. It sucked up some skin on his penis and cut it. I called and put in a complaint to Munchkin and I am very disappointed that this toy is still on the market a month later. This toy is dangerous and should not be given to children.

Comment Initial post: June 15, 2010 8:37 PM PDT

Julie Everett says:

The same thing happened to my 19 month old son tonight. I reported it to the CPSP [sic]. You should do the same since the company didn’t take you seriously. My son has injuries to his penis and testicles. Here is the link if you like. https://www.cpsc.gov/cgibin/incident.aspx

Very Dangerous, June 15, 2010
By Julie Everett (Florida)

My son loves this toy. Tonight he was playing with it in the tub and also set it in his lap and it sucked some of the skin from his penis and his testicles and cut both of them. I will be filing a complaint with the company as well. Do not buy this for your child!

I agree it is a dangerous toy…, August 8, 2010
By Pamela Beightol (Falconer, NY United States)

I had the same thing happen to my 15 month old when he was playing with the toy. His skin from his penis got cut after about 3 minutes play with the toy. I would not let my 5 year old play with it either.

I would have given it no stars if possible, August 26, 2010
By Kendall Tupker

The same thing happened to my 13 month old son. We had just given him this toy to play with in the bathtub and within a few minutes he was screaming in pain. While he was holding it in the water near his lap it caught his foreskin and cut him. Needless to say the sub ended up in the garbage and I made a complaint to the company. Never, ever buy this toy.”

This was publicly available on Amazon for months before either the company or the agency did anything about it. By all appearances, neither did Amazon.

Let’s face it, this item is not exactly a dire threat to our way of life. That being said, this kind of insensitivity to consumer needs and expectations is how unjust laws like the CPSIA get written, passed and revered. It is also raw, red meat for a headline-mad CPSC anxious to justify its existence and its budget. Do I hear massive penalties?! Manufacturers have to think ahead and consider whether they want stories like this told about them. This is a compliance issue, a duty of care issue. It is NOT an issue that requires legislation. Unfortunately, nothing is routine at our regulator these days. Who knows what the implications will be flowing from this recall.

One last thought: among the many reasons that I truly HATE the CPSIA, it is the rising spectrum of a liability feeding frenzy over children’s product safety. This can ruin what we are doing, and in any event, I don’t relish planning my business around protecting myself from ravaging trial attorneys. Paranoid? Well, I received notice of this recall at 5:40 PM CST and in the next 15 minutes found these two sites devoted to this very recall:

Lawsuit Settlement Funding and Lawyers-and-Settlements.com. The latter website invites: “If your child has suffered an injury related to the use of this product, please click the link below and your complaint will be sent to a lawyer who may evaluate your claim at no cost or obligation.” Remember, this was up within 15 minutes of the announcement of the recall.

Think of the chaos that will follow the much-anticipated public database. We can only pray that a Republican Congress will de-fund the database before it gets off the ground. Or else we’ll all be in the ground . . . .

Vote on November 2nd. It’s your duty!

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CPSIA – Appropriate Recall Points Out The Real Problem

CPSIA – Stories from the Front (My "Vivid" Imagination)

783 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 27 days left until Election Day.

Have I ever mentioned how the CPSIA is strangling us to death slowly, death by a thousand cuts? I know the media and the “leaders” at the CPSC want me to put up bodies, my word and my reasoning are not enough. I also realize the body they want to see most of all is mine. Sorry, guys, I am working to prevent the delivery of that evidence to you. After all, anecdotes aren’t evidence. Somebody said that once . . . .

How about some other evidence (anecdotes) from our business in recent days?

a. Good news for the U.S. economy? We just added our SIXTH person to our growing department of compliance and safety folks. Please NOTE that the volume of work is going to EXPLODE when the testing stay is lifted, so these hires are just a starter. For many years, it was one or two people doing this job (including me). No longer . . . .

I know what you’re thinking, this obviously confirms how much we needed the extra safety people. In addition, it follows naturally that everyone is so, so, SOOOO much safer now that we have six pairs of eyes on the ball, not the one or two pairs we relied on for years. And those are jobs being created by Congress and the CPSIA – we must be so much better off . . . right?

Well, let’s take a look at those points.

First, are we adding jobs? No. The department is clearly growing, BUT those jobs do not create revenue. They create COSTS. We are adding those jobs without increasing new economic activity (we’re not growing) – in other words, our burden to conduct the same or less business is growing. That’s simply a drain. Even WORSE, as a company, it turns out we shrunk our headcount in 2007, 2008, 2009 AND 2010. So much for a recovery . . . . If we are shrinking our headcount this year but have a growth department like Compliance, what does that mean? It means that we are reducing our investment in revenue-generating activities like Marketing and Sales, and shifting our personnel investment into managing bureaucracy. To pay the cost of paper pushing, we are shrinking overall headcount.

What-a-stimulus-plan!

As for safety, we achieved a remarkable 26-year track record with far less investment and far fewer people. I firmly believe that more cooks in the kitchen sharply raise the probability of poorer results. Yes, more is NOT better. Why? Because the focus on our efforts is now COMPLIANCE, not safety. [We still work on safety first but it has a lot more competition from paper pushing.] Compliance monitoring and “gotchas” have become a perverse parlor game. Consider Sean Oberle’s recent meditation on Mood Rings. The subject of whether the rings are SAFE never comes up, it’s all about whether they fall within the rules or not. Safety is secondary in the CPSIA scheme – and everyone is losing sight of what we’re trying to accomplish. Paper stacked to the rafters won’t make anyone safer but then again, it’s comforting to have so many rules to follow.

Do I recall correctly that Mattel with its many CPSC-certified internal labs just recalled about 11 million units of toys? Hmmm.

b. Profit Prevention in Full Bloom at Learning Resources. We had two lessons in the joys of safety compliance money-burning in recent days. Consider these stories and their implications on incentive, motivation, ability to fund our operations, fairness and most importantly, safety.

First Case: We sold a longstanding product incorporating a motor to a mass market retailer with its own testing regime. Their testing regime includes CPSIA tests and is administered according to their specifications by a certified test lab of their choosing. The motor for that item was tested and failed for phthalates. We don’t know why – it has been made reliably without the six verboten phthalates since 2007 (many passed tests in our files). So we pulled a second sample from the same batch, and bingo, it passes. This happens all the time.

Of course, certified labs are never wrong. We are the only ones who are ever wrong. After all, the certified labs are CERTIFIED. No doubt that’s how Mattel keeps its shop so clean. Oops, they had some big recalls recently, didn’t they? I am confused . . . .

Anyhow, back to my story. Motor fails for phthalates and then passes. [Let's not dither over whether phthalates on internal components could even THEORETICALLY harm anyone. It's all about compliance.] Unfortunately for us, this nonsense took two weeks. So the customer penalized us by making the sale a guaranteed sale. If they don’t sell out, we lose.

Total cost – unknown. Was any of this cost budgeted for? Of course not. Is our customer happy? No. Could we control against this risk? Probably not, as the explanation of the “failed” test is not and never will be known. We are not making pharmaceuticals here, we make injection molded toys, but we are being held responsible for chemistry and testing results that have no real world significance.

And, it is worth mentioning, all this cost and disruption had NO impact on safety. It only reduced our profit and made us miserable.

Second Case: Another motor case. In the mania over safety and compliance, many formerly minor “gotcha’s” have become elevated in signficance. This time, we were trying to mollify a customer over EMC approval of a motor. Electrical motors emit a frequency, apparently, which is regulated. You know, the government doesn’t want our motor-powered toy to bring down a plane. We are required to test several of our products, sometimes even calculators. In this case, the motor failed . . . although we have no record of planes crashing after several years of sales of this toy and its motor. Our customer then hired a consultant at its expense to tell us how to “fix” our motor. The result – we were told to add two resistors to the motor, which we did, but then it was too weak to power our toy.

Then we had to find another motor. This took time and finally, we found another motor and had to have it retested. This entire process took two months. Once testing was complete, we were so late with this Xmas order that we were forced to bring in inventory by air freight to make it up to the customer. This cost about $15,000 in air freight and testing costs were an estimated $5-6,000 more. Think of how safe the planes are now!

This customer is a big customer of ours and if we didn’t air in product for them, they told us they would have cut us off.

We had a great relationship with the customer before this interaction. How do you think they feel about us now? Do you think they respect us as much? Do you think they believe we “know what we’re doing” because our motor failed an obscure and meaningless test? Does it matter that it is basically impossible for a terrestrial toy of this magnitude to influence the operation of a plane miles up in the air? No matter what, we look bad and we lost all of our profit and more on this ordeal, not to mention our good name.

And no one was made safer.

Thanks Congress! Thanks CPSC! Thanks Democrats! Can’t wait to show my appreciation in the future. I’ll find a way.

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CPSIA – Stories from the Front (My "Vivid" Imagination)

CPSIA – My Comment Letter on 100 ppmLead Standard

774 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 36 days left until Election Day.

My comment letter submitted today on the proposed 100 ppm lead standard due to be inflicted on August 14, 2011:

September 27, 2010

Todd A. Stevenson
Director, Office of the Secretary
Room 502
U.S. Consumer Product Safety Commission
4330 East West Highway
Bethesda, Maryland 20814

Agency: Consumer Product Safety Commission (CPSC)

Re: Docket No. CPSC–2010-0080 Children’s Products Containing Lead; Technological Feasibility of 100 ppm for Lead Content

Dear Mr. Stevenson:

I am hereby submitting comments in response to the Solicitation of Comments on Children’s Products Containing Lead; Technological Feasibility of 100 ppm for Lead Content (Docket No. CPSC–2010–0080) published in the Federal Register on July 27, 2010 (the “Proposed Rule”).

You have requested feedback and additional information on several topics relating to the prospect of a new lower 100 ppm lead-in-substrate standard. I will attempt to respond to your specific queries at the end of this letter. I find that the questions you have articulated are basically irrelevant to our company’s situation. Your questions seem to presume that the standard will be implemented. If you take the step of implementing the new standard, you will be inflicting needless and extension damage to our company with absolutely no corresponding benefit to consumers or the general public. This is terrible and irresponsible public policy. The new standard is not based on science but rather phobia and fear of the unknown. Our business will suffer for no purpose. The jobs lost will at your hand.

I want to comment on process. The agency appears to be in a race to complete its CPSIA rulemakings before year end, damn the consequences. According to www.regulations.gov, the CPSC received 73 comment letters on the Proposed Interpretative Rule for “Children’s Product” (CPSC-2010-0029 due June 21, 2010). Nevertheless, as has been widely reported, the agency ignored or glossed over the vast majority of those comments (including all of mine) and pronounced the draft rule to be “final” with virtually no changes. This flagrant disregard of public comments turned the CPSC’s rulemaking process into a sham if not an outright breach of law. I believe the agency intends to pass through rulemaking this year to avoid the embarrassment of further extending the CPSIA testing stay due to expire on February 10, 2011. The incentive to give short shrift to our comments grows daily.

I have lost faith in the sincerity of the agency’s interest in public comments after two years of being completely ignored. To judge by the agency’s disregard of my numerous comment letters, I must add little to your deliberations – in which case I do not understand why you ask me to waste hours on letters like this. After all, if you have no interest in my views, why not let me spend my time on other more productive activities? Unfortunately, I have also learned that any silence by stakeholders will be interpreted as “approval” by the powers-that-be. Thus, we are left with no option but to write these letters. With those thoughts in mind, I hereby submit my comments on the 100 ppm lead standard, fully anticipating that I will be ignored yet again.

I am aware that the agency contends that it is “compelled” to implement this new standard without regard to economics. The extremely rigid legislative language governing the implementation of the 100 ppm standard is thus portrayed as insurmountable. Is the agency truly powerless to resist? I might take that position more seriously if the agency was equally committed to following the law in other aspects of its daily affairs. However, the CPSC exhibits no such self-restraint. CPSC recalls initiated in flagrant disregard for the “substantial product hazard” standard in Section 15 of the CPSA demonstrates that the agency can invent legal flexibility wherever it wants. For instance, the CPSC pressed for a recall of McDonald’s Shrek glasses (signifying that the glasses were a “substantial product hazard”) despite this June 4th acknowledgement by the agency’s Director of Public Affairs in a tweet: “Scott_Wolfson: Note to reporters: the recalled McDonald’s glasses are not toxic.” Safe glasses do not constitute a “substantial product hazard” by any definition – yet the agency proceeded anyhow.

So when does the law actually matter, precisely? If safe drinking glasses may be labeled a “substantial product hazard”, then I guess anything goes. I find it worrisome to be regulated by a federal agency which does not abide by a disciplined interpretation of law but instead caters to prevailing political whims. If the law means nothing, then the agency should not presume to assert its inability to resist this provision. I think that’s just too convenient to be believable.

My comments on the proposed 100 ppm standard are informed by my view that the agency can do as it pleases. I have not restricted myself by the fiction that economics don’t matter.

The problems with the 100 ppm Lead Standard:

a. The new standard will have NO impact on human health. There is simply no evidence of injuries from lead at levels between 100 ppm and 300 ppm in substrate. It is notable that no other federal agency (NIH, CDC, EPA, FDA, etc.) has identified lead-in-substrate as a human health hazard. Without evidence of injuries at these barely measurable lead levels, the new standard cannot be justified economically or otherwise. It is worth noting that if the “cost” of lead-in-substrate levels of 100-300 ppm cannot be measured, the “benefit” of the new standard will be equally elusive. Given the known costs of this initiative, the new standard fails any conceivable cost-benefit analysis.

I published a study of CPSC recall data from 1999-2010 in my blog (www.learningresourcesinc.blogspot.com) in May 2010, revealing that only one death has been documented in association with lead in children’s products in the last 11 years, and only three (unverified) lead injuries in the same period. This is substantially fewer childhood fatalities and serious injuries than swimming pools and spas cause in an average day according to CPSC statistics. Given the trillions of daily interactions between children and Children’s Products in the course of a year, these meager 11-year lead injury totals are the statistical equivalent of no injuries. Thus, it will be impossible to prove statistically that any reduction in injuries flows from the change in standard. Troubling? Fear of lead-in-substrate is nothing more than a Congressionally-endorsed fear of cooties.

b. The new standard will substantially raise our product costs. The new standard means we will need to implement much tighter manufacturing tolerances for materials and for our processes. The many extra man-hours needed to implement and maintain these tighter tolerances will be expensive. It is difficult to estimate the cost, but we project a 10-20% increase in cost for finished goods subject to the new standard. Subcontractors who manufacture our goods will charge us for the risk of waste, plus the additional overhead required by the new standard. That is, they will charge us more if they are still willing to remain a vendor of Children’s Products subject to this standard. We are a small business, so many of our factories may feel our short runs are simply not worth the risk. That’s how I would look at it if I were them. Loss of vendors (manufacturing capacity) is yet another cost we would bear under the new standard.

It is worth noting that based on the results of our last two years of testing (thousands of testing line items), we estimate that less than 2% of our testing line items fall between 100 ppm and 300 ppm in lead as of today. The cost of trolling for those few affected components will be excessive and the waste associated with replacing “defective” materials will be a tax on our entire production and fulfillment processes. Not exactly a stimulus program. . . .

c. Our ability to control lead levels is unknown because test result variances are so wide. We have found that testing multiple samples from the same lot can show variances of up to 67% in lead content. It doesn’t take much variance to produce wild percentage swings at such trace lead levels. As an illustration, I have attached hereto a test report on a SINGLE PIECE OF PLASTIC STRING used to fasten a mesh bag. The string was tested in ten places, resulting in lead levels of 239 -275 ppm. In another case, we found three test results of the same yellow plastic substrate varied from 23 -139 ppm. None of this matters from a safety standpoint but from a regulatory standpoint, it’s a crisis in the making.

These small variances potentially endanger our business. How are we supposed to run our business selling inexpensive children’s products burdened by such an inflexible physical standard? The CPSC needs to recognize that substrates in the real world are not pure, consistent and invariable. The tight tolerances in this new standard will likely have us retesting several items a month at considerable expense and strain. [And G-d knows what standard the CPSC will inflict on us to govern retesting.] Each retest would presumably interfere with our ability to deliver on time and would stress our system and our people. Out-of-pocket costs would be high, perhaps over $100,000 per annum for our product portfolio of 1500 items; labor and other frictional costs would no doubt add to this total substantially.

d. It will be impossible to predict which components will fail. As test results tend to vary significantly for components from the same lot, it is difficult to control or predict problems. We have found violative results for many different materials used in our business – there is no pattern. Defects found in certain components might render the entire finished good worthless, potentially greatly increasing our losses. For example, an inexpensive backpack might be found to have a zipper that violates the new standard upon completion of the production run. This could happen even after extensive pre-manufacturing testing because physical goods tend to vary in composition. Perhaps only a tiny percentage of the zippers violate the new standard by a few ppm, but given the cost to repair and rehab the item and the practical inability to identify violative zippers, the entire lot of backpacks might have to be scrapped. There would be an increased incentive to substitute components across entire product lines, not because of any health or safety concern but simply to avoid regulatory compliance risk. Differences in utility would be a secondary consideration to avoidance of CPSC recalls or scrapping finished goods inventory. This situation would not be stable because consumers would not likely accept lower standards for our products just to mollify the CPSC – other seismic market changes could be anticipated.

e. The legal risks implicit in the new standard are simply intolerable. Let me ask you a question: how would you attempt to manage a major risk to your business caused by less than 2% of your activity? What if you had no idea WHICH 2% it was? What could you do? I think you might reevaluate your business model. Most people don’t roll the dice on their family wealth or their regular income. By imposing a standard for lead-in-substrate that is barely above measurable levels, the agency would be imposing EXACTLY this risk on us.

We believe we would be exposed to a daily risk of assault by consumer groups and other do-gooders bent on our destruction. This combat would be divorced from considerations of safety – it would be all about regulatory compliance. Our business purpose is not to pay fees to CPSC Bar attorneys, write up Section 15 reports or perform recalls. We do not have the profit margins to finance this kind of wasteful activity and do not have the spare capacity to deal with the regulatory “crisis of the day”. The legal risks of such conflict can quickly get out of control – and insurance is simply not a viable option economically. If we must bear these heightened risks, we will have to revisit our business model.

I hope the agency will not dare the children’s product industry to go belly up just to prove this point.

f. Companies, acting in good faith, are generally INCAPABLE of adopting the new standard as a practical matter. Everything can be made of low lead materials. Zippers can be made of platinum, alphabet blocks can be made of wood, cotton fibers or rhodium. Use of recycled materials can be discontinued (the anti-green movement). Durable and inexpensive materials used for years without incident can be discarded in favor of “purer” materials. All of these things are possible. But they are not practical and they are not economic. If we are to indulge the fantasy of the money-oblivious CPSIA, then whatever we can imagine is possible and money doesn’t matter. This is regrettably unrealistic – businesses exist in the real world and money DOES matter. Thus, companies operating in good faith can’t adopt the new standard if their business model is scrambled.

g. Dealers in our goods can be expected to adopt their own standards to create a regulatory “cushion”. Distributors and retailers have been building their own safe harbors to provide CPSIA protection over the last two years. We have many customers with unique and wildly variant compliance requirements despite the crafting of thousands of pages of rules from the CPSC under the CPSIA. Our dealers can always beat the CPSC in a game of “Can you top this?” If the agency implements a 100 ppm standard, we fully expect a new outbreak of “regulatory compliance exuberance” among retailers. What will happen to us under those circumstances? With a CPSC-fed mania, we will incur yet more costs and bear yet more risks. Our markets will shrink.

h. We believe these rules will so demoralize and de-motivate our staff that we will face high turnover rates among our employees who know all of your rules. Our regulatory compliance team is not on “work release” from jail. Their jobs are not intended as a form of societal punishment. If, however, compliance with the CPSC’s bureaucratic rules becomes too tedious or risky, or the stress of managing a string of crises and a blizzard of conflicting rules becomes overwhelming, our trusted associates will seek less stressful employment elsewhere. They don’t HAVE TO do this for a living. What is the CPSC planning to do to help small businesses who find themselves back at square one after a costly investment of thousands of dollars in specialized training? Is the new CPSC Small Business Ombudsman going to wave a magic wand to make our problems go away? I think we all know the answer – too bad for us.

Here are the answers to your questions:

1. Materials that are consistently under 100 ppm in lead content. You have previously provided a list of such materials for the 300 ppm standard. This list included some useful concessions, such as wood and cotton fibers, but also included useless and irritating examples like gold and platinum, gemstones and various byproducts of nuclear decay. In our experience, the common substrate materials used in educational products have varying (trace) levels of lead. As noted above, we have seen significant variances in lead content in a single string, and in substrates taken from the same lot. I have no confidence that any material we use can be proven to ALWAYS contain than 100 ppm lead.

2. Strategies or Devices to comply with the new 100 ppm standard. The only strategy we could employ is pre-manufacturing testing on materials with substantially increased testing frequency. As noted above, natural variances among many materials prevent us from creating any reliable safe harbor and cost increases from such testing activity (and the cost of scrapping otherwise acceptable raw materials) will greatly shrink our product line. As a consequence, we would likely have to sharply reduce our product line or go out of business – all thanks to the CPSC and our Congress!

3. Consequences of use of compliant materials meeting the needs of the product. We have not spent any resources evaluating the market demand for educational products made of platinum. We do not intend to switch over to osmium or ruthenium for their purported lead-free properties (we find toxicity to be a greater concern). We have not spent our time figuring out if gold is a suitable material for pattern blocks or our Reading Rods. There is no answer to this ridiculous question. As I mentioned above, more than 98% of our test line items complies with the new standard. The materials and components that fail do not fit a pattern. Tests are inconsistent, too.

4. For products that meet the 300 ppm standard but not the 100 ppm standard, provide data on compliance. As noted, we find that we are already 98%+ compliant with the new standard. The components that fail do so unpredictably and inconsistently. Even the same material out of the same lot produces varying test results, as do multiple tests of the same piece of string. We cannot run a business based on junk science intolerance of the world that G-d created. The crazy new 100 ppm lead standard is incompatible with variances found in the physical world.

I want to reiterate that the 100 ppm standard is entirely arbitrary and will save no lives and will preserve no IQ points.

5. Can such items be made compliant through use of other materials? Sure, of course they could. They would be unsalable because the products were rendered too expensive either by the engineering cost or the new materials cost. Is creating products that no one will buy an acceptable solution to this dilemma? Whether by economics (too costly to buy) or re-jiggering of business models (discontinued products), children will be purportedly “safer” because they will lose access to needed products. What a wonderful result! Does the CPSC advocate that American schools teach physical science with photos of magnets, paper clips and rocks? Perhaps we should revert to rote-and-repetition math education rather than modern techniques of hands-on learning. No doubt the CPSC would singlehandedly solve our national education crisis. Bring on pointless material substitutions and let the fun begin.

6. Best practices to be used to always comply with the new standard. I recommend dropping most products and only making items that are CERTAIN to be compliant. This in practical terms may be impossible, and as noted above, is completely uneconomic. Another good practice to discard everything that isn’t virgin material. I know that’s not “green” but we have to be really, really safe, right? Another super idea is to substantially increase our testing, but of course, we cannot afford the current level of testing as it is. That seems somehow unrealistic. Other strict controls on manufacturing seem equally out of reach. There are so many variables to manage to achieve the new standards – we must control the factory environment as though it were a hospital ICU. That’s just not possible at current cost levels. Our factories would have to be “restructured”. I bet the Small Business Ombudsman can coach us on this!!!

Please note: we don’t have to reorganize our factories because we don’t have to stay in the children’s product market. If the CPSC expects us to reorganize our entire way of doing business to accommodate a phobic standard not based on any observable public health problem, we may opt out. Is this really the purpose of the CPSC – to micromanage markets, to restructure the economy, to substitute for market forces? I think not. Please check the CPSA to see why your agency exists. I hope a Republican-controlled Congress will do exactly the same thing in a few weeks’ time.

7. The lowest technologically feasible lead level below 300 ppm in our products. We can achieve anything for a cost. There are no “lowest” levels. Why not specify entirely lead-free? We can make everything out of gold and osmium! Lay in a few gemstones and diamonds, and you will have a sparkling new toy that cannot poison anyone with lead. It may have other problems (choking hazards? Sharp points?) but at least no one will die from lead poisoning. Not that anyone did previously . . . .

8. The date by which our products can meet the 100 ppm standard. In my opinion, the date is NEVER, because we have no practical ability to control quality to the level you require. Even at our current 98%+ compliance with the new standard, it would be extraordinarily disruptive to attempt to be 100% compliant. After a few episodes of being shut down by the CPSC or sued by some lunatic consumer group over nothing, we would exit the market. If you intend to deprive us of the meaning and pleasure of our work to make children’s lives better, we’ll leave the well-being and education of our nation’s children to you. That would be a very sad day for us.

Thank you for considering my views on this important subject. This letter took me all day; I hope you won’t completely ignore it as you have all my other letters.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.
380 North Fairway Drive
Vernon Hills, IL 60061

Read more here:
CPSIA – My Comment Letter on 100 ppmLead Standard

CPSIA – Regulations Are Killing Us

774 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 36 days left until Election Day.

The headline in the WSJ says it all (thanks, Jennifer):

“The Regulation Tax Keeps Growing. Blame Washington, not China, for the decline of American manufacturing.” [Emphasis added]

I have written endlessly on this topic in relation to the poisonous CPSIA. You know the drill.

Of course, it can hardly be surprising that this is happening under the “too little government, too little regulation” administration of Barack Obama. It is a rich irony that the supervisor of regulations appointed by Mr. Obama is Cass Sunstein, my former law school professor. As the cognoscenti know, Sunstein is known for his aversion to uneconomic regulations. Consider this prediction from February 2009:

“Even his detractors recognize Sunstein, 54, as an amazingly prolific legal scholar with a keen intellect. But they worry about his insistence on tying regulations to cost-benefit analysis, the bedrock principle of his Bush-era predecessor, John Graham. They’re also concerned about his prediction last year that Obama will be a deregulator. ‘He is off on the wrong track,’ says Rena Steinzor, a progressive University of Maryland law professor.” [Emphasis added]

Either Sunstein was given a sham of a job, or the appointment was a sham, or the administration subverted a purportedly sensible initiative, reining in regulations using a cost-benefit philosophy. Whatever happened, it is clear that Mr. Sunstein has been utterly ineffective in any purported efforts to control the beast. As noted, we have covered this topic repeatedly in this space.

The WSJ notes:

“In a report released last week for the Office of Advocacy of the U.S. Small Business Administration, we find that small businesses bear a disproportionately large share of regulatory costs. The portion of these costs that falls initially on businesses overall was $8,086 per employee in 2008. But these costs are not borne equally by businesses of all sizes. Larger firms benefit from economies of scale in compliance; small businesses do not have that advantage . . . . Small manufacturers bear compliance costs that are 110% higher than those of medium-sized firms and 125% higher than large firms’ costs. As much as it is fashionable to blame China for the demise of small manufacturing in America, the evidence suggests that looking for some reasons closer to home is warranted.” [Emphasis added]

What-a-shock! Who could have seen this coming?

The WSJ article is full of useful quotes, check it out. All roads lead to Rome – the regulatory monster is choking us to DEATH. And as usual, there is little motivation to do anything about this self-induced disaster until the bodies pile up the sky.

Sadly, my arguments fail simply because of the offense of not being dead yet.

Hey, CPSC, keep your head in the sand. Can’t see it, must not be there. . . .

Read more here:
CPSIA – Regulations Are Killing Us

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